In Tangshan, the former steel hub of China just a few hours drive outside the capital Beijing, the once busy streets have turned quiet and a sense of despair and desperation is evident.

Dozens of men, once employed in the city’s numerous mills that pumped out as much steel as possible to help feed China’s unprecedented economic boom and fuelled the nation’s residential and commercial property market development, are now aimless on the streets.

China’s government has declared steel and iron production across the country will be reduced by 80 million tonnes within the next two years, a direct consequence of the authorities’ aim to implement more sustainable economic growth and help fix the worsening pollution crisis. It is �estimated that about 60 million tonnes of the reduction will come from Hebei, where Tangshan, a prefecture-level city, is located.

The province, the heartland of steel production, has seven of the top 10 most polluted cities in China and residents are demanding action.

An Air Quality Index (AQI) reading yesterday showed pollution in Beijing was 130, more than four times the level that the World Health Organisation considers unhealthy.

Beijing residents awoke to messages on their smartphones warning them of the poor air quality and advising them not to spend long periods of time outside.

In Hebei, steel production last year dropped by 0.6 per cent but significantly it was the first decline in 14 years. The region produced 185 million tonnes of the nation’s total 823 million tonnes of steel.

Steel giant Baosteel yesterday reported its 2014 net profit was down by 0.45 per cent, to 5.79 billion yuan ($1.2bn), and warned of tough conditions in the year ahead for the Chinese industry.

“The steel sector remains extremely competitive in 2015 and so, demand and supply will slow in tandem,” the company said in a statement.

“The steel sector will still suffer from oversupply and it will be a new normal for companies’ operations to just eke out small profits.”

Several unprofitable steel �factories have been forced to close in Hebei in the past year, and �production cutbacks have been �ordered at the larger state-owned organisations that are still working.

The slowdown has had direct consequences for Australia, which provides the bulk of China’s iron ore imports. The commodity’s price has now fallen to $US54.80 a tonne for delivery into Tianjin, close to its lowest level in six years.

China currently has a reported 100 million tonnes of iron ore inventories stored at its major ports after buyers took advantage of the recent low prices.

It has been estimated in Tangshan alone that about 100,000 workers either have lost their jobs or will lose them in the next few years and the production cutbacks will cost the region about 50 billion yuan in lost revenue.

The Hebei province last year declared an economic growth rate of 6.5 per cent, the third lowest in China and well below the national GDP of 7.4 per cent.

Workers who have been effected by the steel industry slowdown are clearly resentful. The Weekend Australian was hassled several times while in the town by former workers not keen for the area’s current woes to be publicised.

In the Fengnan district, Mr Liu lost his job last year at the Fufeng Steel Company and said prospects in the region were now gloomy.

“The company stopped producing steel last year and there were 1500 workers laid off,” he said.

“We are being paid just 600 yuan a month until October but after that I don’t know what will happen to us. The steel market has slumped and we were producing almost 1 million tonnes of steel per year, which is a large amount. The government should be subsidising a large company like us.”

Mr Wang, a guard at a deserted mill said the industry slowdown had had a clear impact on people’s lives.

“If production comes back then workers are going to be easy to find,” he said.

“During the boom time, people here had better lives. We were able to buy meat and fish here freely because people were earning money. But now a lot of us cannot �afford fish. I hope things get better.”

Guofeng Steelworker Ma Gian�guo said thousands of workers were now concerned for the �future, after the government warned that most of the production cuts would be made in Hebei.

China’s steel exports fell by 24 per cent last month, one of the worst performances in year, following a 1 per cent rise in January

“The company is clinging on but we are worried,” Mr Ma said.

“Several mills have stopped production already and the government is reducing steel output because of the air quality. We don’t know if our company is going to lay off workers like many others have recently. Almost everyone in this area, and the other businesses, are dependent on this company for their livelihood.

“It would be a disaster if stopped production.”

Fuhaixin steelworker Wang Kunqi said the falling price of steel plus the higher costs of intensified environmental regulations was making it tough for smaller mills in the area to survive.

“Our mill is not making a profit but we are also not making a loss, so it’s a fortunate situation,” he said.

“Many smaller mills have gone bankrupt. There are big costs involved in producing steel, so we are earning less than we were before. It’s a tough period.”

Guofeng Steel Company worker Wu Yaohui said thousands of workers’ livelihoods depended on steel production in the region.

“We know the company is losing money because the steel price is cheap and at the moment demand is weak,” he said.

“But the company is owned by the local government and thousands of workers depend on the company, so it’s very hard to bankrupt it.

“We still get paid every month.”

In Hebei, the negative consequences of the steel industry’s weak performance are starting to be felt outside the sector.

An amusement park in the Fengnan Economic Development Zone was being built, but work stopped suddenly two years ago when the province’s funding started to be affected by the steel slowdown.

The park eerily stands half built and caretakers Mrs Zhang and her husband Mr Niu have not been paid for a year.

The couple spend their day feeding chickens and watching television in a demountable hut on the edge of the park.

“The work stopped because the district government could not �afford it,” Mr Niu said. “You can see the newly built shopping malls are all empty. The business of the steel mills here is bad, so the local government has no money.

“We have not been paid for about a year and we don’t know whether work will ever begin again.”

HSBC analyst Chris Chen said it was likely that Chinese steel demand would be sluggish this year as most economists had forecast growth of 7 per cent.

It is estimated that at the 7.4 per cent growth achieved last year, the nation’s steel consumption would have been down at least 3.4 per cent, year-on-year.

“We believe Chinese steel companies will continue to face a tough environment in 2015 with structural oversupply, weakening demand, tight credit conditions and intensifying price competition,” Ms Chen said.

“We see steel prices falling yet limited downside in raw material prices.

“The rising environmental costs brought about by new stricter standards should further squeeze margins.”